Are you donating a car to charity? Proceed with caution

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Vehicle donations can be one of the most costly ways to give in all of philanthropy, those in the industry say. They’re complicated and time-intensive, often requiring extensive advertising, expensive towing, mechanical repairs, storage, paperwork and eventual sales of what are often clunkers. That all costs a lot of money. (Photo by Getty Images)

Vetmade Industries has a vaunted mission: To return disabled warriors to the workforce. It boasts that “93 percent of funds go directly to the cause of helping our heroes.”

Well-meaning folks donated cars worth more than $2 million to Tampa-based Vetmade in 2015 – but only $91,348 made it to the charity, according to data from the California Attorney General. That’s 4.5 percent.

What happened to the overwhelming bulk of that money? About $1.9 million – 95.5 percent of revenues – was spent by a company called Just Donated Inc. in Orange, which specializes in “promoting your cause and generating a steady flow of vehicle donations,” according to its online pitch.

Vehicle donations are one of the most costly ways to give in all of philanthropy, those in the industry say. They’re complicated and time-intensive, often requiring extensive advertising, expensive towing, mechanical repairs, storage, paperwork and eventual sales of what are often clunkers. The charities usually don’t have to do anything at all, leaving all the work to the (usually) for-profit middlemen.

All that costs a lot of money. But, as we’ll show you, some charities get a lot more out of it than others.

SMALL SLICES

Just Donated, the Orange business that processes vehicles for charities, did not return calls and emails seeking detail on the numbers. But Vetmade’s executive director in Tampa, John Campbell, said that there are many costs incurred by tow truck drivers, auction houses and the companies that run the donations themselves.

Campbell has been happy with Just Donated, he said; after all is said and done, some companies don’t return anything to the charities at all.

• Another Southern California company specializing in charity car donations is Fund Raising Partners, long of Los Alamitos and recently relocated to Redondo Beach. Fund Raising Partners processed vehicle donations totaling $1.6 million for the nonprofit Durable Medical Equipment Aid Society in Tarzana in 2015, of which the charity got just 1.7 percent (or $27,235), according to the Attorney General’s data.

The charity’s executive director said the numbers reflect initial start-up costs of running a new car donation program, and that numbers for 2016 will be better.

Fund Raising Partners also handled car donations totaling $593,889 for Faith’s Hope Foundation in Fullerton. The return to that charity was even lower – just $3,213, or 0.5 percent.

• Automotive Recovery Services of Westchester, IL, processed donations worth $6.5 million for the National Veterans Service Fund in Darien, CT. The charity got $1.2 million, or 18.5 percent.

“The amount a charity receives for a vehicle donation is driven by two main factors, 1) the market value of the vehicle donated, and 2) the cost to solicit the donation,” said Phil Kraft, executive director of the National Veterans Service Fund Vehicle, via email. “In the current market we are seeing softer prices for donated vehicles.”

When market prices are soft, the charity focuses on generating “donation volume” to hit its financial goals, Kraft said.

“National Veterans Services Fund has a very limited staff and does not have the human resources to do hands-on marketing. Therefore we choose to utilize broader methods of marketing to solicit donations including SEO and PPC (pay per click). These broader marketing methods can be more costly, but help us drive higher volumes of vehicle donations.”

• Michael Reese Enterprises in Costa Mesa specializes in processing a very large volume of low-value vehicles. It handled donations worth $6 million for a nonprofit called Growing in Voices in Irvine. The charity got $571,165, or 9.5 percent.

• The biggest players on the scene were the Car Donation Foundation, aka Wheels for Wishes, in St. Louis Park, MN., and its vehicle processor, National Fundraising Management in Hopkins, MN. Total revenue was $31 million, of which $14.1 million went to the charity, or 45 percent.

HEAVY LIFT

That’s better than average.

Total revenue generated by vehicle donations in California was $64.2 million in 2015, with charities getting about $25.5 million, or 39.8 percent of the total, according to the data.

“Vehicle donation programs have become more popular over the past several years,” the AG said in her annual report on commercial fundraisers. “These programs are administered either directly by charities, or by commercial fundraisers that solicit donations and manage the program on a charity’s behalf, in exchange for compensation.”

How does it work?

The process usually begins when a donor contacts a charity or commercial fundraiser in response to an ad or solicitation campaign, the AG explains. In the initial phone conversation, the donor will be asked questions about the vehicle. Generally, the vehicle will be accepted unless the cost of towing it exceeds its value.

The donated vehicle is then sold and the proceeds are divided between the commercial fundraiser and the charity. “Because all costs associated with advertising, towing, storing, and selling the vehicle are deducted from the proceeds before any distribution to charity, charities usually only receive a marginal amount from the car’s sales proceeds,” the AG warns.

The attorney general filed suit against Ventura-based Cars 4 Causes in 2015, charging it with breach of fiduciary duty and deceptive and misleading solicitations. C4C, as it is known, kept and spent millions of dollars in donations that should have gone to other charities, the AG charged in the suit.

MAKING GOOD

Still, some make it work a lot better than others.

• Advanced Remarketing Services of Warren RI processed $1.1 million of vehicle donations for the Independent Charities of America in Larkspur, CA. The charity got $888,104, or 78.4 percent.

• Advanced Remarketing Services processed $523,053 of donations for the American Cancer Society in Atlanta. The charity got $426,764, or 82 percent.

• Automotive Recovery Services processed $1.4 million of donations for the National Council of the Society of St. Vincent de Paul in Maryland Heights, MO. The charity got $1.1 million, or 74 percent.

• Automotive Recovery Services also processed $2.7 million of donations for the National Kidney Foundation in New York. The charity got $1.9 million, or 69 percent.

Zachary Lasky is the e-commerce product manager for Advanced Remarketing Services. “Our goal is to return 70 to 80 percent to the charity – we form a partnership with them. We’re not tyring to pull the wool over anyone’s eyes,” Lasky said.

It can return so much because it doesn’t depend solely on auctions to sell the vehicles, he said. That includes selling directly to buyers, which cuts down on auction fees. Advanced Remarketing Services also avoids storing vehicles for long period of time – which cuts down on storage fees – and on expensive towing.

“It’s definitely disappointing to see people taking advantage, maybe not have the best interest of the charity they work with at heart,” he said.

Donors should read the tea leaves. Charities that are willing to accept just a tiny fraction of donation proceeds may deserve further financial scrutiny.

FOR EXAMPLE

Fullerton’s Faith’s Hope Foundation was dedicated to “assisting families going through the emotional and financial hardship due to the hospitalization of a loved one,” according to its mission statement.

In 2012 – the last year it filed tax returns with the IRS – it spent $3.5 million, and $3.3 million of that went to fundraising. Spending on its aforementioned core mission was just $157,533, or 4.5 percent (charity watchdogs like to see at least 65 percent of spending on the core mission).

The IRS revoked Faith’s Hope Foundation nonprofit status last year, after the charity failed to file tax returns for three straight years.

Also, according to their IRS filings:

• The Car Donation Foundation, which does business as Wheels for Wishes, spent $27.3 million in 2015. More than half of that – 51 percent – went to fundraising.

• Growing in Voices in Irvine, which “promotes charitable giving by connecting people with the chanties and causes they care most about and supports humanitarian services to the hungry, poor and sick,” spent $11.9 million in 2014. Of that, $10.9 million went to fundraising.

• National Veterans Service Fund, whose mission is “to educate and inform the public on the needs of veterans and their families, primarily concerning the Agent Orange Issue and Gulf War illnesses,” spent $9 million in 2015. Six million of that – 66 percent – was spent on fundraising.

SMART PERSON’S GUIDE CHARITY CAR DONATIONS
• Do your research. CharityNavigator and Guidestar are great places to start to check out how charities spend their money. The Attorney General lays out how much each charity actually gets, compared to the value of the donations, in its annual Commercial Fundraisers report.

• Give vehicles to charities that can actually use them – delivering meals to the homebound, taking elderly people to the doctor, etc. Contact the United Way, a community college or vocational school to find programs that need donated vehicles.

• Find a charity that handles its own car donations. That cuts out the middle-man and allows the charity to keep all the proceeds. If your favorite charity doesn’t accept cars directly, find one that does.

• If the car runs, drive it to the charity yourself. That’ll save money on pickup and towing.

• If you still want to give to a charity that uses a middleman, ask what percentage of your donation the charity will actually get.

• Do paperwork correctly. Donors are responsible for notifying the Department of Motor Vehicles of the transfer of registration. You can be held responsible for parking tickets and worse if you don’t formally sign the car over to the nonprofit.

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